Gorilla, Inc., has recently launched a ramen/sushi fusion dish that has received an overwhelmingly positivereaction from the market. In response to this success, the company is reinvesting all of its earnings to fuelfurther expansion. This past year, the earnings per share stood at $10, and these are anticipated to increase by20% annually over the next five years. However, by the end of the fifth year, it's expected that competitors willintroduce similar products. Consequently, analysts forecast that Gorilla will then reduce its reinvestment rateand start distributing 60% of its earnings as dividends. Additionally, from that point onwards, the company'sgrowth rate is projected to decelerate to a stable 3% per annum. If Gorilla's equity cost of capital is 8%, what isthe value of a share today?Complete the table below. You can use an Excel spreadsheet and then copy and paste the sheet.Additionally, please provide detailed explanations beneath the table on how to determine the values ineach cell, using either equations or descriptive methods.YearEPS growth rateEPSDividend payout ratioDividendsExpected CF ofInvestorEquity cost of capitalValue of share012345678

Current year Earnings per share$10.00Growth rate for the next 5 years20.00%growth rate after 5…

Answered: Gorilla, Inc., has recently launched a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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XYZ has determined that market dynamics will result in some annual variations in the numbers they had previously estimated. Deeper market research has revealed that the cost of acquiring a customer is estimated to be $2,000. Also, estimates over five years for the remaining customers at the end of each year with average revenues and cost for each customer are presented in the following table. Considering a discount rate of 15%, calculate the net CLV for XYZ. Discount rate = 15% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Number of Customers 200 150 120 90 72 54 Revenue Per Customer 5,000 5,000 5,500 5,500 6,000 Variable Cost Per Customer 2,000 2,000 1,800 1,800 1,500
Kokomochi is considering the launch of an advertising campaign for its latest dessert product, the Mini Mochi Munch. Kokomochi plans to spend $5.6 million on TV, radio, and print advertising this year for the campaign. The ads are expected to boost sales of the Mini Mochi Munch by $7.6 million this year and $5.6 million next year. In addition, the company expects that new consumers who try the Mini Mochi Munch will be more likely to try Kokomochi's other products. As a result, sales of other products are expected to rise by $1.8 million each year. Kokomochi's gross profit margin for the Mini Mochi Munch is 32%, and its gross profit margin averages 21% for all other products. The company's marginal corporate tax rate is 21% both this year and next year. What are the incremental earnings associated with the advertising campaign? Complete the table below: (Round to the nearest dollar.) Incremental Earnings Forecast Year 1 Sales of Mini Mochi Munch Other Sales Cost of Goods Sold Gross…
What is the projected net income for 2017?
The income statement, also known as the profit and loss (P&L) statement, provides a snapshot of the financial performance of a company during a specified period of time. It reports a firm's gross income, expenses, net income, and the income that is available for distribution to its preferred and common shareholders. The income statement is prepared using the generally accepted accounting principles (GAAP) that match the firm's revenues and expenses to the period in which they were incurred, not necessarily when cash was received or paid. Investors and analysts use the information given in the income statement and other financial statements and reports to evaluate the company's financial performance and condition. Consider the following scenario: Cold Goose Metal Works Inc.'s income statement reports data for its first year of operation. The firm's CEO would like sales to increase by 25% next year. 1. Cold Goose is able to achieve this level of increased sales, but its interest costs…
Please don't answer in image format.. thanku
Allegience Insurance Company's management is considering an advertising program that would require an initial expenditure of $196,945 and bring in additional sales over the next five years. The projected additional sales revenue in year 1 is $94,000, with associated expenses of $34,500. The additional sales revenue and expenses from the advertising program are projected to increase by 10 percent each year. Allegience's tax rate is 30 percent. (Hint: The $196,945 advertising cost is an expense.) Use Appendix A for your reference. (Use appropriate factor(s) from the tables provided.) Required: 1. Compute the payback period for the advertising program. 2. Calculate the advertising program's net present value, assuming an after-tax hurdle rate of 10 percent. (Round your intermediate calculations and final answer to the nearest whole dollar.) 1. Payback period 2. Net present value years
Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 80 percent for the next year and the probability of a recession is 20 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3.9 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.3 million. Steinberg's debt obligation requires the firm to pay $930,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.4 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole…
Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $4.3 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.7 million. Steinberg's debt obligation requires the firm to pay $970,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.8 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number,…
Bubbly Waters currently sells 440 Class A spas, 590 Class spas, and 340 deluxe modeſ spas each year. The firm is considering adding a mid-class spa and expects that if it does, it can sell 515 units per year. However, the new spa is added, Class A sales are expected to decline to 295 units while the Class C sales are expected to increase to 615. The sales of the deluxe model will not be affected. Class A spas sell for an average of $14,700 each. Class C spas are priced at $7,400 and the deluxe models sell for $18,400 each. The new mid-range spa sell for $9,400. What annual sales figure should you use in your analysis?
Steinberg Corporation and Dietrich Corporation are identical firms except that Dietrich is more levered. Both companies will remain in business for one more year. The companies' economists agree that the probability of the continuation of the current expansion is 70 percent for the next year and the probability of a recession is 30 percent. If the expansion continues, each firm will generate earnings before interest and taxes (EBIT) of $3 million. If a recession occurs, each firm will generate earnings before interest and taxes (EBIT) of $1.4 million. Steinberg's debt obligation requires the firm to pay $930,000 at the end of the year. Dietrich's debt obligation requires the firm to pay $1.5 million at the end of the year. Neither firm pays taxes. Assume a discount rate of 12 percent. a-1. What is the value today of Steinberg's debt and equity? (Do not round intermediate calculations and enter your answers in dollars, not millions of dollars, rounded to the nearest whole number, e.g.,…
A manufacturer in Nebraska ships finished products to the ocean port in San Diego, California. New loading facilities will be needed to accommodate the expected growth in sales for their new product. In 2018, the company shipped 3.5 million pounds of product through several areas in San Diego. The logistic Costs in 2018 are given in the table. Due to growth in emerging markets, the company expects a growth rate of 8% per year through this port for the next five years.Rail Truck Transportation Variable Cost $ 170,000 $ 310,000 Inventory CostsCarrying 40,000 25,000 handling 15,000 40,000 Ordering 5,000 15,000 Fixed Cost 160,000 90,000 Total Cost $ 390,000 $ 480,000 A. What is the variable cost of each transportation method (Rail and Truck)? B. What is the cost to ship 4 million pounds of products for each transportation method? (Note: Round the variable cost per pound to 4 decimal places) C. At what level of demand per year would these two transportation methods be equal in terms of…
A new company, is being established to manufacture and sell an electronic tracking device:the Trackit. The owners are excited about the future profits that the business will generate. They have forecast that sales will grow to 2,600 Trackits per month within five months andwill be at that level for the remainder of the first year.The owners will invest a total of $250,000 in cash on the first day of operations (that is thefirst day of July). They will also transfer non-current assets into the company.Extracts from the company’s business plan are shown below.SalesThe forecast sales for the first five months are:Month Trackits (units)July 1,000August 1,500September 2,000October 2,400November 2,600The selling price has been set at $140 per Trackit. Sales receiptsSales will be mainly through large retail outlets. The pattern for the receipt of payment isexpected to be as follows:Time of payment % of sales…

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